Correlation Between Rico Auto and REC

Can any of the company-specific risk be diversified away by investing in both Rico Auto and REC at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Rico Auto and REC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rico Auto Industries and REC Limited, you can compare the effects of market volatilities on Rico Auto and REC and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Rico Auto with a short position of REC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rico Auto and REC.

Diversification Opportunities for Rico Auto and REC

0.55

Correlation Coefficient

Rico Auto  REC

Very weak diversification

The 3 months correlation between Rico and REC is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Rico Auto Industries and REC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REC Limited and Rico Auto is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Rico Auto Industries are associated (or correlated) with REC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REC Limited has no effect on the direction of Rico Auto i.e., Rico Auto and REC go up and down completely randomly.

Pair Corralation between Rico Auto and REC

Assuming the 90 days trading horizon Rico Auto Industries is expected to under-perform the REC. In addition to that, Rico Auto is 1.0 times more volatile than REC Limited. It trades about -0.16 of its total potential returns per unit of risk. REC Limited is currently generating about 0.02 per unit of volatility. If you would invest  55,646  in REC Limited on September 14, 2024 and sell it today you would earn a total of  309.00  from holding REC Limited or generate 0.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Rico Auto Industries  vs.  REC Limited

Rico Auto Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rico Auto Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

REC Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in REC Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, REC is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rico Auto and REC

The main advantage of trading using opposite Rico Auto and REC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rico Auto position performs unexpectedly, REC can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in REC will offset losses from the drop in REC's long position.

The idea behind Rico Auto Industries and REC Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.